Finland holds parliamentary elections on 19th April 2015. The election is of high significance, because the new government will inherit a weak economy, growing debt and a need to implement several structural reforms, which the current coalition government failed to do. The Centre Party, currently in opposition, is expected to win the election with nearly 1/4 of the votes and to start negotiations to form a new government.
It is a close call whether the Social Democrats or conservative National Coalition, both in current government, or the populist Finns Party (previously True Finns Party) comes 2nd and has the chance to negotiate with the Centre Party. Irrespective of the composition of the government, we expect it to reduce public expenditure by at least EUR3bn, refrain from raising taxes, implement a social & healthcare reform, cut red tape from business and try to keep labour cost inflation low. This kind of tough love would curb domestic spending in 2015-2016, but boost longer term growth outlook. Finnish government bond yields have remained close to those of German bunds and the election results are unlikely to change that.
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